Monday, September 28, 2015

This week we’re going to dig into the topic of wholesaling real estate. Our guest speaker will be our REI officer and good friend, Eric Schmucker.

Eric has been buying properties at radically discounted prices in Roanoke for several years. He also paid for a several thousand dollar real estate wholesaling training class for additional education for him and his brother from the people at Fortune Builders.

At our upcoming meeting, Eric is going to disclose several of the secrets to successfully wholesaling property.

Even if you’re not interested in personally wholesaling property this meeting will be of tremendous benefit to you. It will show you how to find your own wholesale property and get below wholesale deals for yourself. The better price you get the property for the higher your ROI is.

Get there a little early for a good seat. You don’t want to miss this one!

Monday, September 21, 2015

This week we’re going to have our sponsor and commercial property expert, Frank Martin as our guest speaker. I was amazed last time Frank came. He is very well versed in the commercial investing industry.

REI hasn’t focused much in the past on commercial investing other than small commercial residential. Frank is going to give us the rundown on commercial investing as a whole and how to finance deals like these.

Great information! Get there a little early so you can make sure you get a seat.

What's Happening In Roanoke Regarding The Government And Real Estate?

Maybe someone will read this and get some ideas on how to efficiently spend the money we give them. No one I know cares about our hard earned tax money spent to help people that REALLY NEED help. The government taking anything beyond that is theft. See my review of the 75 page document below.

Roanoke City Council Meeting September 21st 2015.

Acceptance and Appropriation of funds. This entire city council agenda is a good example of how the Federal Government taxes a tremendous amount of what you earn and turns around and gives it back conditionally to your local governments. Back when Abe Lincoln was president, federal taxation was 5% of what a person earned. And the Federal Government was only for united military protection against foreign invasion.

Our tax rate now is significantly higher. Below is an example of how the Federal Government was able to force every state and locality in the country to abide by what they want them to do. This is how we lost our state sovereignty. Or in other words how the states lost their ability to make their own laws. They tax the citizens of every state. If the locality is behaving and following what they wish for them to do, they can get some of that money back. If they don’t behave, their citizens will continue to pay the extraordinarily high tax rate but they won’t let them have any of the money.

1. Department of Fire Programs gets additional funding of $307,532. This funding appears to be from the Federal Government TO the State TO Roanoke.

2. The Federal, US Department of Justice gives funding to the city for bulletproof vests via a grant for the police and sheriffs departments. As long as they follow the terms, provisions and conditions of the Federal Government, they aren’t required to match any funding. They will be getting a 100% funded grant of $17,102.

3. The Department of Justice gives grant money $40,172 to the city for the bicycle patrol program. The Sheriffs department gets $26,782 for in car video systems. Again, there is no local match required as long as they follow the conditions of the Federal Government.

4. The Department of Motor Vehicles gives grant money tho the city to target people driving while intoxicated. This grant is for $21,440 and there is a cash match of $1,518 and an in-kind match of $10,720. It seems like the city only has to pay the smaller $1,518 amount they aren’t clear in the agenda as they refer to another city council meeting where they discussed all in kind matches.

5. The DMV gives grant money to the police for targeting pedestrian bicycle safety. This grant is $3,200 and requires a match of $1,600. They will use it for overtime pay for traffic enforcement.

6. The DMV gives money to go after speeding drivers. There is a cash match of $6,720 for this grant of $13,440.

7. The DMV gives grant money to the police for “occupant protection”. Most of these grants will be used for overtime pay. This one is $11,200. There is a cash match of $5,600 that they may not have to pay.

Here’s where the big money gets spent:

8. City approves a 2014-2015 annual evaluation report on the cities federal housing and urban development (HUD) funded programs. They are required to prepare a report that summarizes how they spent the Federal tax payers money. The city reports that it is finishing up it’s spending on the West End Target Area. They have primarily increased population density by building many new houses rather than focusing the HUD grant money on fixing up the houses that are there.

The city now has transitioned to the Melrose Orange corridor for their next 4 to 5 year target area. They get roughly 2.2 to 2.5 million dollars from HUD every year to spend on low income areas. This money is required to be spent on various areas that are related to housing. This money is primarily Robin Hood money taking in the form of taxation from productive working individuals and giving it to non working unproductive individuals.

They have now started the 13th street infrastructure project which they say will benefit the West End. This is the final step in the revitalization of the West End. The 2.2 million has been spent in this area for the past 5 years. The previous 5 years prior to this they also spent it on South West Roanoke. That money was used in the Hurt Park neighborhood right next to the West End.

To give you an idea where this is, the West End is the Patterson, Chapman, Campbell area and Hurt Park is the Salem Ave, Rorer area.

They have demolished significantly more houses than they planned on during each year of the grant money to the West End. They have also built quite a few more houses than they planned on. Previously when they were spending in Hurt Park they focused their money on building Government housing.

In the West End area they give money to organizations such as Habitat for Humanity to buy ugly houses and tear down the house. The property is purchased at the city tax sale and by other means. They often pay 10 to 20K or more for the house and then they tear it down which costs an additional 10K. They then build a house that matches the neighborhood style for over 200K so they have a ballpark of 250K into the house. They then find a homeowner such as a Refugee or an English as a second language family and obtain financing for them with pre-made deals with banks to buy that property for around 150K. Banks have federal guidelines to make a certain number of loans such as this. The new owner gets bamboozled because they think they are buying a property that is worth 150k…….. but when they can’t make their mortgage payment anymore they find that they can’t sell their way out of the contract because the house isn’t worth more than 50 to 60K. It’s a big Loose Loose for all.

Rehabbing existing houses would be a more efficient and cost effective way to spend the tax payers money. It would also help get the blight out of the neighborhood and help turn it back around. An extensive rehab to flip quality that compares to the neighborhood standard costs roughly 25K on a couple thousand square foot house. Purchasing the property for 10 to 20K and then rehabbing it adding another 25K to the purchase price puts the new homeowner in a situation where they can have a little equity in the property. The total cost in the property would be no more than 50K and organizations like Habitat for Humanity get lots of donated labor and materials so it would be much less than that.

In this better scenario, the city wins by getting the neighborhood fixed up and increasing their tax assessed values across the board. The neighborhood as a whole wins as each and every homeowners property will be more valuable. The buyer wins by not getting suckered into a loan that is much higher than the true value of the property. The bank wins because the buyer will be able to make the mortgage payments as they will be much lower and easier for them to afford. And the tax payer wins because ALL of the money is returned once the bank loan is made and it can now be used to fix up another. With a rehab strategy in mind, the same tax payer money will be able to be used over and over.

Unfortunately the board members of Habitat for Humanity locally are real estate novices and are doing nothing more than playing with the tax payers money. They are essentially playing their first game of Monopoly and their currant strategy is not the strategy any business minded person would take.

The city also used the HUD money on programs that give these special hand selected people money for a downpayment on the houses that Habitat built, or other homes in the city. They also spent money on homelessness prevention and other homeless needs, public infrastructure needs, and free rehabilitation of owner occupied housing. They plan on spending more money this year in the target area on code enforcement, new homeownership and these free downpayment 1st time homebuyer programs.

Another interesting fact that shows racism is alive and well in Roanoke. They get into some of the details of specifically how they spent this money. 65.4% of people in Roanoke City are white caucasians. The city has a very large population of whites below the poverty level. 29.0% of the population are identified as black or African American. The city used the HUD money to assist 219 black or African Americans. And 177 white’s or caucasians.

Participating organizations that have used the HUD money are:- Habitat for Humanity who’s focus is on building new houses and getting downpayment assistance and financing for selected people. Habitat reports as to being successful in focusing on Refugees and English as a Second Language populations for their new homes and free downpayment to buy them programs. This clearly shouldn’t be a factor in determining eligibility for the assistance. Homeless Assistance Team (HAT) has a focus on rapid rehousing of homelessRoanoke Redevelopment and Housing Authority has a focus on their Section 8 program and public housing. Community Resources Division with this HUD funding reviews city strategic plans and seeks out opportunities for input into restrictive policies and procedures. These restrictive policies and procedures can be in all areas of the government including zoning, code enforcement, eligibility to assistance programs, etc. In 2006 the city significantly reduced affordable housing when they rezoned everything and restricted multi-family housing to very small pockets throughout the city. This was just prior to their building of several massive low income public housing units that they personally control. They have worked diligently to put low income individuals in small contained areas throughout the city. This is a form of income segregation and has NOT been a focus of the Community Resources Division. The Community Resources Division also monitors the liens placed on the houses of every person that they give downpayment assistance to. These liens drop off after a few years of program compliance and the money they have been given becomes a gift rather than a loan.Blue Ridge Independent Living Center used some of this HUD money to provide home modification services for low income disabled families. Building handicaped ramps and helping those who are truly in need is something that I don’t think anyone would have a problem with. The problems reside in the vast majority of this tax payer money that is wasted on bad programs. Some of this special grant money that the BRILC got was used by the city itself to outreach to underserved populations to encourage homeownership and responsible landlording. The responsible landlording consisted of hiring a lawyer to do a few landlord tenant act training seminars. The city is required by HUD in acceptance of the funding to provide housing counseling to assist families to better plan for their finances which they say alone will improve their financial situation. Job training would be more effective. The city also meets with the Social Services and public and private housing organizations such as Roanoke Regional Housing Network, Blue Ridge Interagency Council on Homelessness, and the Housing Partnership at the Fair Housing Board to provide training and certification to over 400 realtors per year giving them their annual credits required to keep their license. Otherwise a Realtor would have to pay for their own required continuing education training. With this HUD money the city also supported the Roanoke Redevelopment and Housing Authority with it’s submission of the Choice Neighborhoods Grant which if they got it would have provided several hundred new low income housing units. It appears that the city is focused heavily on becoming the largest low income landlord that it has ever seen. Some of this HUD money was also spent on giving neighborhood associations money to spend on projects such as sending their members on vacations to national or statewide neighborhood conferences, getting neighborhood signs and trash cans, building covered bus stops, providing bicycle servicing stations, etc.

This is just a small look into just a couple sources of funding that the city gets directly from the Federal Government. This DOJ, DMV and HUD money is given to cities and towns all over the country. The Federal Government has found it to be an effective method of stripping the sovereignty from the states and localities. The money from the DOJ and DMV are required primarily to be spent on Civil Obedience. The HUD funding is Robin Hood money.

Beyond the shocking information above, below are other line items in the agenda that shall be discussed.

2:00 PM Council Meeting ONLY. The 7:00 PM Meeting has been canceled as there are no public hearings. Call 853-2541 if interested in being on one of the city boards.

Building and Fire Code of Appeals - Two vacancies.

City of Roanoke Finance Board - One Vacancy

Economic Development Authority - One Vacancy. Brian Redd resigns as the citizen representative of the Roanoke Finance Board and as Director of the Economic Development Authority as a result of a job opportunity in Charlotte NC.

If So... Should You Be Forced To Jump Through Government Hoops To Do It?

At a recent meeting of the Roanoke City Board of Zoning Appeals (BZA)(1), three people will be prostrating themselves before some local bureaucrats to plead for the special privilege of having guests in their own homes.(2)Back on July 6th, City Council officially allowed citizens to rent extra rooms in their houses on websites like AirBnB.(3) (In case this is your first time on the internet, people use websites such as
AirBnB to make some extra money on the side. Despite the Council’s vote appearing to approve of this, the City does everything they possibly can to get in the way of it actually happening. The blame for this falls squarely on our city manager, Chris Morrill.In order to be able to have a guest in your house from a website such as AirBnB(4), you must:Have a pre-filing conference with the zoning administrator,Fill out an application and pay an application fee of $100,Give a written narrative of exactly what you are going to do inside your personal home.You also must follow the recently established “Four Written Standards for Homestay Establishments”:

That no changes shall be made to the exterior of the building.That it shall have no more than 4 guests total and no more than 2 bedrooms for guests.That they shall be not rented for more than 14 days.That the owner must also occupy the dwelling during the time the guest is there (This is not the national standard. Some leave and let them rent the whole house, some stay and do it more like a bed and breakfast).You then are required to submit a drawing, to scale, of the property interior. There are several other criteria that must accompany the drawing about the property. There are some other hoops as well. The City Manager also wants to confirm

That having guests in your home does not create an unusual demand on public water and sewer that exceeds the design capacity of the systems,That it will not generate traffic on neighborhood streets or main roads that exceed the design capacity of the streets or create a dangerous traffic problem by virtue of driveway location, site clearance, driveway slope or any other factors,That it does not increase the flood potential in the surrounding neighborhood and is also in conformance with the setback, yard, frontage, lot area, parking, signage, screening, shading, etc.Yes, all of this is required to be able to have guests in your own personal home. A final requirement is it must further the intent of the city’s comprehensive plan by bringing business to local business owners and also exposure to less popular parts of town. Isn’t that great? The city is doing all of this to help businesses!

The municipal regulations outlined above were not voted on by the city council. This tyranny is coming from the zoning department and city manager who heads all of the offices. Our local power-hungry bureaucrats like nothing better than to make the people they purport to serve jump through unnecessary hoops to share their home with others and make a little pocket money on the side.

Sunday, September 6, 2015

The vast majority of our congressmen and congress women are involved in real estate investments. They pass laws and regulations that personally benefit themselves. This is why we have so many advantages in our industry. Many times when there is a law that appears to be restrictive, there ends up being a hole created somewhere else that prevents you from complying with that law based on varied circumstances. Loopholes are left open by our politicians to reduce their tax burden so they can become wealthy relatively quickly. If you keep abreast of what’s going on, you too will end up knowing where they are you can do the same.

Politics has everything to do with investing. If you were keeping abreast of global politics you would know like I do where you can get beautiful beach property for pennies on the dollar right now as a result of the dollar being so strong. And that property is going to appreciate tremendously within the next 10 years. What goes up comes down. The opposite of that is true as well.

A savvy investor keeps abreast of changes that are happening in the industry or industries that they invest in to determine where the tax advantages are so they can make a fair return on their investment.

This week our special guest speaker will be Jerry Dunnavant, President of Covenant Real Estate Services. Jerry will be showing us how to defer capital gains taxation through the 1031 Exchange and he will teach us about the Dodd-Frank changes that will occur on October 3rd this year.

As I said last week with Spanky Macher AKA Slumlord Millionaire. I said it will be a packed house and it was. I am telling you right now that it will be again. Over the years I have developed the ability to approximately determine the size of the group based on the topic. This will be a popular meeting. If you want to make sure you get a seat, you should get there early. And if you end up getting there late and don’t see a seat, no need to leave. Ask the waitress to bring some more chairs in. We’ll pack it in like sardines until we get a bigger room.

I have had many people within the past couple months asking me how to get rid of bedbugs and extreme cock roach infestations which are getting real bad in Roanoke right now. Over the years I have dealt with some extreme infestations and by trial and error have become a self taught expert.

I decided to write an article that will be going out with the email blast and will be posted on the REI website as well that I can send members to when they have a problem. Rather than explaining it to people over and over which is what I have been doing. This article is about how to get rid of a major infestation, not just a few here and there which can be dealt with by other means.

You have to hit them real hard to kill them all in a critical situation like this or you will be dealing with a never ending problem that won’t go away. If done exactly as I explain, you will completely eradicate every bug in the house (with exception of wood boring bugs) while keeping people and pets healthy. What I’m going to explain to you is very similar to the methods that you will read in forums that landlords nationwide have found to be effective. However I have my own very particular way of doing it that I have found to work well.

Fist things first, you need to explain to your tenants that you never take a mattress, couch, recliner or anything like that off the street again, even if it looks brand new. It is there for a reason and there is a high likelihood you will be bringing in a colony of bugs if you take it. And go ahead and let them know that you will treat the infestation for them but they are required to replenish their security deposit within X number of days.

If it is a heavy roach infestation tell your tenants that they can’t leave even a crumb of food on the counter or a dirty dish in the sink. If they do they will be working against you by feeding the roaches and a roach doesn’t need much food to live. That includes not leaving out pet food.

No bug can live in an environment that everywhere they go they are walking in Diatomaceous Earth.

Diatomaceous Earth is a powdery type substance that is made up of prehistoric ground fossilized animal life mostly in the form of shells that have hardened to a sandstone type consistency. It is said, on a microscopic level, DE, has sharp little edges all over it and it gets in bugs joints and cuts them open while drying them out.

So the first thing you need to do is to buy some “food grade” DE. You can get little expensive bags of it at Lowe’s or you can order a big 50lb bag from a place like 7 Springs Farm in Virginia which I have found to have the best prices. Most bags of that size you are looking at about 50 bucks for the bag and 25 for shipping.

You want to make sure that you are always getting food grade diatomaceous earth. They call it food grade because they feed it to cows, horses, etc to kill a bad form of bacteria in their stomach that will digest their food before their stomach has a chance to digest it and absorb the nutrients. They also blow it in the chicken coups to kill parasites that get on the birds. And they put a little in their feed to keep them healthy.

People eat DE as well as a supplement. You wouldn’t believe how many people claim that it has cured them from all kinds of varied ailments. It is one of those “cure all” products like ACV ~ apple cider vinegar.

Regarding the application of the DE, you can’t just sprinkle some on the floor and expect it to work. Just like you can’t just sprinkle boric acid on the floor and expect it to kill bugs. You have to literally coat every square inch of the room, attic, basement, etc with a fine layer of DE. So no matter where they walk in the house they will get it on them.
In order to apply it correctly, you have to have a blower. I recommend the Dustin Mizer blower so you can quickly get enough dust throughout the house. All of the other dusters for sale are very small puffer type dusters and don’t put out much dust. You can buy Dustin Mizer blowers on eBay or Amazon. I don’t know of a store that sells them locally.

Have a look at the link below showing the blower in action using a different pest control product.

At this point you need to tell your tenant that they have to leave that dust on everything for 1 full month. You have to give enough time for the babies to all hatch out and get killed as well. So that means no sweeping and no dusting. If they want to dust off their food preparation area that’s fine. Yes it may be irritating to have this dust everywhere and leave it there but so what. Do they want the bugs gone permanently or not. It will kill them all. Fleas, bedbugs, roaches, ants, spiders, everything. And them and their pets will be safe in the process. If they don’t believe you feel free to eat some. The dose recommended online for humans is from 1 teaspoon to 3 heaping tablespoons per day. It’s a pretty remarkable product.

In Addition to DE Treatment, With Roaches:

Along with that, once the dust has settled, get a tube of some clear roach gel bait. I typically use Hot Shot Clear Roach Gel Bait. Any kind will be fine. Squeeze out a pea sized drop and put them every 12 inches across the top of the kitchen counter back splash, down the side of the cabinets and across the baseboard of the cabinets. Then also run a line of pea sized beads down the side and bottom of the refrigerator and stove. Do the same to the bathroom cabinet.

Then after 2 weeks, come back to the house and do the exact same thing with the gel bait again to leave some fresh poison for the babies to eat. There are many roaches in the walls that will never come out but no worries. Roaches are cannibalistic. Several of those that came out and ate the poison will go back in the walls and die. They will eat the dead roaches and they will in-turn get poisoned.

In Addition to DE Treatment, With Bedbugs:
An additional step with bedbugs beyond treating the house with diatomaceous earth would be to get some bedbug spray like Hot Shot Bedbug Spray and treat the bed, couch and recliner. Take all of the sheets off and spray the mattress and box spring down. There is a little sewn flap at the top edge of a mattress. Look under that flap. That’s one of their favorite hiding places.

They can also hide in areas as small as a screw head hole. There can be 10 to 20 in one of those holes. So look the bed over very well and spray it down well.

On the box spring pull away some of that thin cover that goes over the bottom and hides the wood frame. Put your duster in that hole and blow dust in there as well.

Go around all of the electrical plug outlets in the room and blow the dust directly at it. If you aren’t lazy you will do a better job by taking the plates off the electrical outlets and then blow them so you get it all in and around the insides of the box. They like to hide in those electrical outlets. There’s something about electromagnetic waves and bugs. They love to be around them.

Now once you’ve done that and instructed your tenant to take their bedding to the laundry mat and have it washed, you need to also instruct them on how to keep their bed bedbug free while we’re waiting for all of them to die off from the DE.

The next thing you or your tenant needs to buy are bedbug traps. These traps go under the bed and or couch legs. See pictures of the bedbug traps that are at Home Depot. They have a textured surface that allows the bedbug to climb up in it but a polished smooth surface that prevents the bedbug from getting to the bed leg so they remain trapped in the plastic device.

Now for these traps to work… you have to pull the bed away from the wall. If the bed is touching the wall than the bedbug can walk up the wall and on to the bed. You also need to instruct your tenants to not allow their sheets or comforter to touch the floor. If they do they will just take that route up on the bed.

Yes, this can be a real pain in the A**. Now if you don’t want to do it yourself, REI of Virginia recommends using a good, reputable, competitively priced pest control company such as our friend and sponsor Twoie Knox who owns B and C Exterminating. He can have it done turnkey by his crew. It’s up to you on how much work you feel like doing.